Free Market Economy Bangladesh India

Concept of Free Market Economy with focus to Indian Economy and options for Bangladesh

1

1.0 INTRODUCTION

Free market economy has become the only economic system dominating the world after the collapse of socialism in Soviet Union and other East European countries. Today, the application of market mechanism is widespread all over the world. The free flow of capital and goods throughout the world has made the world like a single village. Success of countries practicing free market is only evident with the growth of the USA, the Scandinavian countries, Germany and France as major world powers. Countries such as India and China, by allowing liberalization of its trade to some extent and practicing free market principles brought about more efficiency among its domestic producers and increased its growth rate markedly. Free market existing with the doctrines of Socialism like limited regulation of prices by the government to protect the poor can be an ideal situation for developing countries like India, China and South East Asian countries to attain growth and prosperity. 2.0 FREE MARKET ECONOMY

The term free market economy primarily means a system where the buyers and sellers are solely responsible for the choices they make. In a way, free market gives the absolute power to prices to determine the allocation and distribution of goods and services. These prices, in turn, are fixed by the forces of supply and demand of a respective commodity. In cases of demand falling short of the supply of a respective commodity, the price will fall as opposed to a price rise when the supply is inadequate to meet the growing demand of a good or service. Free market economy is also characterized by free trade without any tariffs or subsidies imposed by the government. The basic feature of the free market economy is that only people with sufficient control over resources, and wealth, in particular have the privilege to purchase goods and services, often priced very highly in a free economy. Prices, which are the only allocating and distributing

Concept of Free Market Economy with focus to Indian Economy and options for Bangladesh

2

factor in a free market economy, place the poor in an unenviable situation who are gradually thrown out of the system without any access to wealth and the basic needs of subsistence. Thus it deems absolutely imperative that a country like India and a few Latin American countries like Brazil, Peru and Nicaragua having a large number of poor have a public distribution system in place with subsidized prices being fixed by the government to protect the poor. Free market economy is considered to the most efficient or optimum device to allocate a country’s resources, with wealth or income being the only yardstick. Free market economy is often associated with a Capitalistic Economy with means of production being privately owned. 3.0 FREE MARKET ECONOMY IN INDIA

For a half-century after gaining independence in 1947, India’s politics were dominated by the Congress Party’s socialist orientation and tilt toward the Soviet Union. In the 1950s, steel, mining, machine tools, water, telecommunications, insurance, electricity generation and other industries were effectively nationalized. The banks followed in 1969. The country’s first Prime Minister, Jawaharlal Nehru, also pursued land redistribution. Innovation was stifled by the Industries Act of 1951, which required all businesses to obtain licenses from the government before they could introduce, expand or change their products, a system known as the “Licence Raj.” The government also imposed import tariffs in the name of encouraging domestic production, and Indian companies were prohibited from opening foreign offices. Foreign investment dried up under stringent restrictions and a labyrinthine bureaucracy. As a result, manufacturing never blossomed and the economy stagnated at what the economist Raj Krishna called the “Hindu rate of growth” of 3 percent...

You May Also Find These Documents Helpful

...
VIDEO CASE
1 . Is Peet’s market monopolistic or an oligopoly?
An oligopoly
2. What are some ways that Peet’s Coffee & Tea tries to differentiate its product offering?
Offering free samples and educating their customers about their products. The Peetniks Program.
3. What consumer needs is Peet’s satisfying?
The need to feel a part of special group. The need to feel like an informed consumer.
KEY TERMS
free enterprise - an economic system with few restrictions on business ownership and activities
cultural (or workplace) diversity - a belief that cultural identities should be maintained and valued
business - an organization which sells goods and/or services to consumers
profit - the amount of revenue gained after costs are deducted from revenue
stakeholders - a party who can affect or be affected by an organization’s actions
economics - the study of the production, distribution and consumption of goods and services
microeconomics - the study of the market behavior of individual consumers
macroeconomics - the study of economic trends as a whole
Emergency Economic Stabilization Act - provided authority for the federal government to purchase certain troubled assets and to provide individual income tax relief
economy - management of resources
factors of production - inputs to the production process
entrepreneur - a person who organizes and operates a...

...While capitalism is a self regulated economic system, communism is a government run economy. In capitalism, the individual has full control over production and decides on the price structure. Contrary to this, it is the society or the government that determines the price structure in communism. Capitalism can organize itself into a complex system without an external guidance or central planning mechanism. Friedrich Hayek considered the phenomenon of self-organization as underpinning capitalism. Prices serve as a signal as to the urgent and unfilled wants of people, and the opportunity to earn profits if successful, or absorb losses if resources are used poorly or left idle, gives entrepreneurs incentive to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.
Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by Gross Domestic Product (GDP), capacity utilization or standard of living. This argument was central, for example, to Adam Smith's advocacy of letting a freemarket control production and price, and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist system. Proponents also believe that a capitalist economy offers far more...

...FreeMarketEconomy
The freemarket is an economic system where the state only intervenes to collect taxes, enforce contracts and private ownership. This means the government in countries with a freemarketeconomy does not set the price for goods and services. Instead, suppliers fix prices using the forces of supply and demand from consumers to gauge their worth.
The government's intervention can become necessary in some spheres. For example, many developed countries with a freemarketeconomy are found literally subsidizing their farm sectors. The same can also be said for other areas where market failure, distortion or the inability of the freemarketeconomy to provide vital goods and services needed by people in general at costs they cannot afford might cause hardships.
Critics of the freemarketeconomy model claim this is mainly a theoretical concept, as every country, even those with capitalist economies, place some restrictions on the ownership, exchange of commodities and put in place lots of subsidies for large businesses. Regardless of the critics, the freemarketeconomy is still considered to be the most efficient system to allocate a country's...

...FreeMarketEconomy- DEFINITION
The term freemarketeconomy primarily means a system where the buyers and sellers are solely responsible for the choices they make. In a way, freemarket gives the absolute power to prices to determine the allocation and distribution of goods and services. These prices, in turn, are fixed by the forces of supply and demand of a respective commodity. In cases of demand falling short of the supply of a respective commodity, the price will fall as opposed to a price rise when the supply is inadequate to meet the growing demand of a good or service. Freemarketeconomy is also characterized by free trade without any tariffs or subsidies imposed by the government.
Acompletely freemarket is an idealized form of a marketeconomy where buyers and sells are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.In financial markets, freemarket stocks are securities that are widely traded and whose prices are not affected by availability.In foreign-exchange markets, it is a market where exchange rates are not pegged (bygovernment) and thus rise and...

...ASSIGNMENT ON
BUILDING A MARKETECONOMY IN INDIA
&
THE RISE OF ISLAMIC BANKING IN PAKISTAN
Prepared for:
Prof. Dr. Masud Rahman
Prepared by:
Gazi Md. Ali Zafar
Roll-1003013
BANGLADESH UNIVERSITY OF PROFESSIONALS
Mirpur Cantonment, Dhaka-1216
BUILDING A MARKETECONOMY IN INDIA
1. What were the features of pre reform India and what were the justifications of that?
Answer: The features of pre reform India were as following:
a) The economic system that developed in India after 1947 was mixed economy system characterized by a large number of state-owned enterprises, centralized planning, and subsidies.
b) This system constrained the growth of private sector and that time in India private companies could expand only with government permission. Under this system, dubbed the “License Raj,” private companies often had to wait months for government approval of routine business activities, such as expanding production or hiring a new director. It could take years to get permission to diversify into new product.
c) Much of heavy industry, such as auto, chemical, and steel production was reserved for state-owned enterprises.
d) Production quotas and high tariffs on imports also stunted the development of a private sector, and that time restrictive labor laws that made it difficult...

...determines price in this economy. ... There is no real life example of a purely freemarketeconomy, this only exists in ...
Advantages And Disadvantages Of FreeMarket ... - Free Essays
www.allfreeessays.com/...advantages-and-disadvantages-of-free-market...‎
Advantages And Disadvantages Of FreeMarketEconomy, price Determination With Market Forces. And Government Intervention With FreeMarket Equilibrium ...
Advantages & Disadvantages of Market Forces Determining Prices ...
www.thestudentroom.co.uk › ... › Business and Management‎
Mar 24, 2008 - Advantages: If market forces determine prices, this means it is a ... In the majority of cases, in freemarkets, aren't prices already set at the ...
Market Theory of Wage Determination - Shmoop
www.shmoop.com › Economics › Labor, Wages & Unions › Analysis‎
In-depth review of Market Theory of Wage Determination meaning with chart and ... Long story short: the price of labor is determined in the freemarket just like ...
The Advantages of Free Enterprise | The Classroom | Synonym
classroom.synonym.com › Higher Education Prep‎
The...

...FreeMarket vs Command Economy
! In every government and organization, there has to be some sort of plan to organize transactions between people and companies in order to prosper. The FreeMarket and the Command Economy are two ways the world plans and organizes their economic system. Each have their own benefits and disadvantages and everyone’s opinion differs when it comes to which one is better. It will be hard to compare these two without being biased because this topic is so important. The FreeMarket is a market that is controlled by the people and the Command is one that is controlled by some central authority. This concept of who or what controls the economic system defines their outcome. ! As I said before, the FreeMarket is controlled by the people. This does not mean that we literally control the system. It means we greatly affect it. This market is solely based on the transactions between the buyers and sellers and each buyer and seller can choose freely what they can transact. This volunteer exchange is a great benefit because it allows choice, allowing you to govern your own decisions. For example, you, as a buyer, wouldn’t want to invest in CDs because of their slow decrease in popularity. However, someone else has that power to do so because he may think or know something about the future...

...umbrella of the word "economy", one speaks today of the marketeconomy, the formal economy, the informal economy, the underground economy, the productive economy and perhaps even the reproductive economy, the post-industrial or post-modern economy and the global economy.
Thus while the concept of an economy is not fixed but arbitrary, and may have strayed rather far from the management of household resources, it is nonetheless spoken of in official circles as if there were genuine agreement (sometimes almost as if it were tangible, as "we must get the economy back on track"). The official economic paradigm operative in Canada is that of the marketeconomy -- or the formal economy. This is what is being measured, analysed and reported on.
An economy is said to work within a framework reflecting the values of the society in which it is embedded. Traditionally, three models of an economy have been used: the traditional or feudal, the command economy (where the state determines resource decisions) and the marketeconomy which is the model in use in USA and in most industrialized Western countries. Indeed, even within the marketeconomy, there are different models; for...